The accompanying table presents statistics and the top five rated companies in the ETFI Global Generic Drug Index, which includes a total of 44 companies. Over the past year, generic drug companies have outpaced both the Healthcare Sector SPDR (XLV) and existing drug ETFs such as PowerShares Dynamic Pharma (PJP), Pharma HOLDRs (PPH), iShares Dow Jones US Pharma (IHE), and the S&P Pharma SPDR (XPH).
All of the top five rated generic drug companies and over two-thirds of the 44 companies in the index are based outside of the United States; so a Global Generic Drug ETF would provide investors with access to this rapidly consolidating industry. Most of the companies in the index are small and mid caps with Teva Pharma (TEVA) as the industry leader in terms of market cap and sales, which is about to get even bigger with its pending acquisition of Barr Pharma (BRL).
Trends in favor of the global generic drug industry include the following: nearly $70B in brand name drug sales with looming generic competition through 2012, push to increase generic substitution rates from 65% of all prescriptions dispensed to over 70% to save money for the consumers and the government (through Medicare Part D spending), continued industry consolidation of small and mid-caps by industry leaders such as Teva and Mylan Labs (MYL), and the potential for legislation next year regarding generic versions of high-cost biological agents – with Momenta Pharma (MNTA) as a pure-play in this space with a pending ANDA for a generic version of the injectable blood thinner Lovenox, which had nearly $4B in sales last year for Sanofi-Aventis (SNY).
$9.4 (10/15/08)
